Sorgen says Microsoft’s channel responding well to challenge of change

's channel chief noted that Signature Support, an exclusive partner technical benefit that is part of its new competencies, has been well received by partners who have taken advantage of it.

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Microsoft global channel chief

Since former Microsoft Canada president Phil Sorgen was appointed to succeed Jon Roskill as Microsoft’s global channel chief in August 2013, he has kept up a steady drumbeat on the need for partners to adapt their business models and leverage the cloud to improve their value proposition. Now, more than a year later, he sees the message having sunk in, propelled by the clear direction of the market.

“What has changed over the last year is I never get asked ‘why?’ anymore,” he said. “It’s more about ‘how?’. This is something that is not viewed as a Microsoft directive. They see the industry momentum, which is driven by customer demand. That’s what has turned the question into ‘how?’ And with the question being how, the issue has become the ways in which a partner can build a profitable practice in the cloud, depending on where they are coming from.”

Sorgen said that having the largest partner ecosystem in the industry has helped other Microsoft partners learn from example how to do this, and noted that an eBook Microsoft created with IDC on the different path to building a profitable practice in the cloud has helped as well. Still, he acknowledged that while many partners have started on the journey, most haven’t reached their destination yet.

“[Microsoft COO] Kevin Turner said in July at our Worldwide Partner Conference that as of then we had 64,000 partners who had participated in cloud offerings – mostly – and that that exceeds the number of partners who transact Exchange or Office in a given year,” Sorgen said. “We are very excited about those numbers, but the numbers do not mean those partners have all made the transformation to the cloud from a business partner perspective. It just means they have done deals. But to what extent they have built a first-party IP, how they change their comp models, that’s a journey where partners are at different stages.”

Sorgen emphasized a point he has made many times in the last year, that while the modern channel has had four types of specialization – reselling product; providing project services; providing managed services and providing more complex IT solutions – the cloud is undermining the profitability of the first two.

“The cloud – and not just Microsoft’s – will continue to commoditize very basic services and capabilities,” he said. “Partners we see as being most successful are those doing entire services that leverage repeatable methodologies and project management, or those that create managed services or IP services. That’s a huge opportunity but it’s a different business model than the more basic project services or resell. These more basic services will continue to exist for many years, but their profitability will get harder.”

Change is hard, Sorgen acknowledged.

“How you drive the change management process is critical,” he said. “For instance, changes in comp changes your P&L, and can take you into uncomfortable places. But there are also new opportunities, because the cloud makes geography more opaque. Those that recognize this are accelerating their growth significantly faster.”

On the programmatic side, Sorgen said Microsoft responded to partner requests at WPC by saying that they would launch three cloud competencies on September 29, and they had delivered on that. These covered Azure, Office 365 for small and midmarket customers, and Office 365 for enterprise customers. A fourth, CRM Online, will be launched in the first half of the 2015 calendar year.

“One of their core benefits is Signature Cloud Support, an exclusive partner technical benefit that gives them access to higher technical engineer support from Microsoft,” Sorgen said. “That has been very well received by partners who have taken advantage of that, because it gives them a differentiated access to Microsoft.”

Sorgen also indicated that the Microsoft Cloud Solution Provider (CSP) program, which allows partners to sell Microsoft Cloud Services while keeping full control of the customer through direct billing, provisioning, management, and support. Is gaining momentum in the Canadian marketplace.

“The Tier 2 distributors have been announced in Canada, which means Office 365 and Intune can be billed and supported directly,” he said. “Azure, and EMS and CRM Online will be coming as well, starting in the first half of the calendar year.”

Sorgen also indicated he doesn’t see any lag in reseller adoption of the cloud in Canada.

“I don’t think it’s noticeable,” he said. “The Canadian partner ecosystem has proximity to the U.S. market. They are competing in the US market as well, and the cloud is opening this up in a significant way. Of course, U.S. partners can also go into the Canadian market as well. Partners have always been aware of the fact that the cloud creates both opportunity and threat, so they are quite in tune with this.”

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